1. Consider the following information for YumYum Inc. as of December 31, 2015: Y

Question

1. Consider the following information for YumYum Inc. as of December 31, 2015: YumYum has a service contract with a maintenance company. The contract is for cleaning services at a rate of $3,000 per month. The maintenance company bills YumYum semiannually on October 1 and April 1. The contract commenced on October 1, 2015. During 2015, YumYum received advances from customers for the first time. Total collections in 2015 were $100,000. At December 31, 2015, $30,000 of the advances had not been earned. In 2015, YumYum had 50 employees. Each employee earned 10 days of vacation pay. The actual rate for 2005 was $300 per day. During 2015, 10 employees used all of their vacation days for 2015. At January 1, 2015, the Vacation Payable account had a balance of $10,000. Which entry would you make at December 31, 2015?

debit to Vacation Payable

credit to Payroll Expense

credit to Cash

credit to Vacation Payable

Explanation / Answer

Vacation Payable as on January 1, 2015 : $ 10,000

Used by by employees durig the year : $ 30,000

($300 x 10) X 10

Vacation Payable at December 31, 2015 $ $40,000

So US$ 30,000 to be credit to vacation payable account.

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